Features

WASHINGTON — House and Senate negotiators reached a final agreement Friday night on a 10-year, $1.35 trillion tax cut package that would give individual taxpayers a $300 refund this year and married couples $600.

“We will be able to provide this year more than $30 billion to American taxpayers to use as they see fit, rather than the government,” said House Ways and Means Committee Chairman Bill Thomas, R-Calif.

A blend of President Bush’s tax proposals and earlier versions passed separately by the House and Senate, the compromise carves out a new 10 percent bottom tax rate for the first $6,000 of an individual’s income, $12,000 for a married couple.

Most other rates would be cut by 3 percentage points. The top 39.6 percent rate would drop to 35 percent. The rate cuts will be phased in over six years but the first installment will take effect this July 1.

Republican leaders said they planned to reconvene the House around midnight to debate the final bill. House Majority Leader Dick Armey, R-Texas, predicted the House would vote final passage on it between 3 a.m. and 4 a.m. Saturday. The Senate planned to reconvene later Saturday to act on it.

The deal was reached by four lawmakers who met all day Friday in a second-floor Capitol room. Thomas and Senate Finance Committee Chairman Charles Grassley of Iowa represented the Republicans, Sens. Max Baucus of Montana and John Breaux of Louisiana represented the Democrats.

Other provisions of the plan would double the $500 child tax credit gradually by 2010 and allow people to gradually increase their contributions to IRAs from $2,000 to $5,000 and to 401(k) plans from $10,500 to $15,000.

The estate tax would be repealed by 2010, with exemptions rising from $675,000 now to $3.5 million over time.

Individual taxpayers would get a $300 refund this year. Single parents would get $500 and married couples $600. Refund checks would be mailed to taxpayers, beginning in mid-summer, according to Treasury Department oficials.

“Once the president signs into law this historic bipartisan agreement, the Treasury Department will begin the process of returning tax dollars as quickly as possible to those who paid them,” said Treasury Secretary Paul O’Neill.

In addition to the income tax cuts, the bill will provide relief from the marriage penalty paid by millions of two-income couples by widening the 15 percent bracket so that more of their earnings are taxed at a lower rate.

It would also increase the standard deduction for married couples so it equals twice that of singles.

A new $5,000 deduction would be permitted for college tuition.

Republicans were elated that passing a tax relief bill and hand Bush a major political victory would be accomplished before Democrats take control of the Senate.

“Tax relief is on the way,” said Sen. Phil Gramm, R-Texas.

The negotiations occurred against an unprecedented political backdrop: Vermont Sen. James Jeffords’ switch from Republican to independent becomes official when the tax bill is passed, handing Senate control to the Democrats.

With Bush calling for a final vote before Memorial Day, there was strong incentive to finish the deal.

“Both sides would like to get it done,” said Senate Majority Leader Trent Lott, R-Miss., who will become minority leader under the new power arrangement.

Bush telephoned Thomas and Senate Finance Committee Chairman Charles Grassley on Friday morning, saying he wanted the bill passed before lawmakers left for the holiday.

White House chief of staff Andrew Card was in and out of the negotiating room Friday, pushing the participants to reach an accord.

Bush pushed for tax cuts in his campaign for the White House and since his election, but was forced by Jeffords and other moderates to accept a $250 billion reduction in his original $1.6 trillion proposal. The House passed several bills closely tracking the Bush plan, but senators added several provisions aimed at giving more tax breaks to lower- and middle-income people.

Most Democrats nonetheless opposed even the smaller tax cut, arguing that it would consume far too much of the projected $5.6 trillion, 10-year budget surplus to meet other needs such as education, defense, debt reduction and Medicare prescription drug benefits. They also contended it was unfairly tilted toward the wealthy.

“This tax bill is as generous as any tax bill in history to the upper-income folks,” said Sen. Byron Dorgan, D-N.D.

New York Rep. Charles Rangel, senior Democrat on the tax-writing Ways and Means Committee, called it a fraud and refused to sign the compromise. He said the benefits for low- and moderate-income families “will be dwarfed by its detrimental effects on Social Security, Medicare ... and the health of our economy.”